Supply chain manages operations through various networks of people, companies, products and services to ensure the sales of products. However, with supply chain managing all of these departments to ensure everything is shipped, delivered and transported effectively, there are many risks to consider and strategies to implement to help prevent the many risks in supply chain. The ideal supply chain risk management allows for all businesses to take advantage of strategies that soften the risk factor and find new ways to prepare themselves for success. To effectively create a personalized risk management strategy, it is important to look at the possible risks your company may be at risk of facing. To better understand what some supply chain risks would be is to define supply chain risk management as the process in which a business will think strategically to help establish, evaluate and mitigate possible risks within their supply chain. Supply chain risks can be internal and external and have the possibility of disrupting the entire supply chain. Some external supply chain risks can be difficult to forecast as global supply chain risks require more resources to conquer. Some of the most common external supply chain risks include but are not limited to supply and demand risks, a business risk and an environmental risk. Supply risk occurs when materials that your business is dependent on is not delivered on time which creates problems regarding the production as well as flow of materials. Demand risk happens when the product demand has been misjudged as proper calculation of previous years estimate based on different factors such as purchasing trends has not been properly analyzed. An environmental supply chain risk can occur from environmental issue, politics, or a natural disaster that can negatively affect the timing of any possible aspect. The last example of an external supply chain risk, a business risk, happens when something happens suddenly and randomly involving one of the elements that your supply chain is dependent on for business to run efficiently. To provide some examples of internal supply chain risk, these occur when the risk factor is within your control, these are easier to manage than external risks but should still be avoided as much as possible. Internal risks typically involve manufacturing, planning and control risks, mitigation and contingency risks as well as business risks. A manufacturing risk usually refers to something going wrong that can disturb the process of the supply chain and negatively effect operations. Business risks usually occur if there is an issue in standard business procedure that disturbs the flow of daily business. Whereas planning and control risks involve poorly planned production and management while mitigations and contingency risks happens if there isn’t a contingency plan in place for disruptions to the supply chain. It is also helpful to look at analytics as well as business insights both globally and locally to try and stay ahead of any possible supply chain risks to be best prepared. We have listed some of the top strategies to assist with supply chain risk management.
Strategies for Supply Chain Risk Management
#1) Adopt the P.P.R.R. risk management model
- Prevention- take preventative measures for possible supply chain risk
- Preparedness- create and implement contingency plan
- Response- execute your contingency plan to reduce impact
- Recovery- resume operations
#2) Identify ways to increase supply chain visibility
- Develop better business relationships that can help to reduce vulnerability to risk
- Research technology that can provide greater visibility so you can keep customers up to date
- Look into major credit rating agencies that can provide financial reports of potential suppliers to reduce external business risk
#3) Organize internal risk awareness training sessions
- Teach the entire team about potential risk awareness to educate on things to be aware of and what to look out for.
- Discuss best practices for risk management in supply chain
- Consider a supply chain risk assessment that will test everyone’s knowledge on both internal and external risks and wants to prevent them
#4) Always, always be monitoring risks!
- Constantly monitoring potential risks helps protect operations
- Observe any and all potential risk indicators
- Consider investing in a scalable digital retail solution that is safe and secure and monitors risks from all areas of your supply chain
#5) Utilize collected data to mimic possible risk scenarios
- Use data science and analytics to mimic risk scenarios to test different plans and proactive measures to stay ahead of potential supply chain risks
- Develop contingency plans to better prepare business for the worst-case scenario
- Use data modes to predict what can potentially happen and how you react and prepare business
Adopting these strategies to prepare for risks in your supply chain can help reduce your company’s exposure to the risk as well as separate both internal and external risks and try new methods and ideas to better prepare the entire department as for things to be cautious of and things to look for. Supply chain risk is something that all businesses in this field should be educated on and trained on and each should have its own prevention plan and steps in motion to stay ahead of the potential risks.